Tuesday

11th May 2021

Eurozone bank needs more scrutiny, says NGO

  • "Open doors" at the ECB headquarter in Frankfurt in October 2016. (Photo: ECB/Flickr)

The European Central Bank (ECB) should leave the "troika" of lenders to EU countries and be put under increased scrutiny, according to Transparency International (TI).

In a report published on Tuesday (28 March), the NGO said that the eurozone's central bank enjoys an "extraordinary degree of latitude", which keeps it out of "appropriate democratic scrutiny".

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

  • ECB chief Draghi (r) and his predecessor Tricher (l). "No other central bank in the world holds that power," says TI's report. (Photo: commission.europa.eu)

"No other central bank in the world holds that power," the report says, referring to the ECB's critical role in the financial crisis, which was necessary to maintain the unity of the euro area.

"No decision by the US Fed could result in the ejection of a state from the Union," it says, comparing the ECB to the US Federal Reserve.

The ECB, under its two presidents, Jean-Claude Trichet and Mario Draghi, took decisions that were described as technical but were highly political and went beyond its mandate, according to Transparency International.

In 2010 and 2011, the ECB sent letters to the Irish, Spanish and Italian governments, making its financial support conditional to structural reforms or budgetary cuts. The letters were not public at the time, but were either leaked or published later.

"The ECB held the key to keeping member states within the euro that may otherwise have faced a disorderly exit," the report notes.

In February 2015, after radical left politician Alexis Tsipras came to power in Greece, the ECB said it would not accept Greek bonds as collateral for loans from Greek banks.

And in July 2015, after Tsipras called a referendum on the bailout terms, the ECB refused to increase the level of emergency liquidity assistance (ELA) to Greek banks - a decision that led the Greek government to impose capital controls.

"The ECB’s discretionary powers allowed it to put pressure on Greek banks while negotiating bailout reforms with the Greek government as part of the Troika of international creditors," which includes the European Commission and the International Monetary Fund, says Transparency International.

Saving the euro

TI recognises that decisions by the ECB were crucial in a time of crisis, noting that it has done "more than any other actor to save the financial and economic system of the euro area from collapse."

But it insists that "the ECB needs democratic oversight if the euro is to survive the next crisis," and should leave the troika.

"The ECB should no longer play a substantive role in the Troika and should have no formal role in the negotiation and monitoring of the conditions for receiving bailout funds," it says.

The ECB is already under oversight through the so-called "monetary dialogue", a regular hearing organised with the European Parliament. But this is "not exactly a ‘grilling’ of the ECB’s leadership," regrets TI, calling to change the rules on the ECB's independence and accountability.

TI proposes the creation of an "agreement" with the European Parliament and the Eurogroup, the body of eurozone finance ministers, to set the rules for decisions "that go beyond its mandate but could help avert or contain a crisis" - such as limiting its direct support of a country or making it conditional on structural reforms.

Other measures include giving the EU parliament the power to confirm the appointment of members of the bank's executive board.

The NGO also says that the ECB should publish its decisions and opinions, join the EU lobbying transparency register, and oblige members of its governing council to publish public declarations of interest.

And, because "many executive board members" have taken up job posts in private finance after their mandate ended, it calls for a 2-year "cooling-off period".

"Some recommendations of the report fall outside the ECB’s mandate or were not foreseen in the Treaty," reacted the ECB in a statement on Tuesday.

Benoit Coeure, a member of the executive board, said on Tuesday that the ECB was already "accountable for its policies", referring to the hearings at the EU parliament.

At a seminar organised by TI on Tuesday about its report, Coeure praised the transparency policy of the institution, referring to the publication of the accounts of its governing council meeting, and of the diaries of its executive board members.

He defended the way the ECB acted during the Greek crisis, saying that the conditions for collaterals and ELA were "transparent and equal for all counter-parties in the euro area".

Speaking to EUobserver, several EU officials who followed the Greek negotiations in 2015 said that the ECB always operated in a clear legal environment.

"The situation was different in 2010," said one official. "Back then, the ECB was more directly involved in the negotiation of the measures."

Strangling the Greek economy

Since the 2012 creation of the European Stability Mechanism (ESM), the eurozone emergency fund, the ECB mostly provides a support role in the development of stability programmes.

A diplomatic source said that the ECB's decisions to limit liquidity to Greek banks in 2015 were "justified" and "well-argued" at the time.

"If there were a problem, there would have been a formal complaint at the Court of Justice – and I did not see that happening," the source said.

A former Greek official, with knowledge of the bailout talks in 2015, said that the responsibility of the ECB in the Greek crisis was nothing new.

"There is already plenty written on this topic," he said. "The ECB is the one who strangled the Greek economy."

Varoufakis back in push for ECB transparency

The former Greek finance minister Yanis Varoufakis and German left-wing MEP Fabio De Masi want to know whether the European Central Bank overstepped its powers when putting capital controls on Greek banks in 2015.

Investigation

The ECB: EU's 'bad bank' (for its employees)

An internal report finds 'lack of staff' and high 'burnout' levels at the European Central Bank in Frankfurt - the bank trusted with keeping the eurozone stable and secure.

News in Brief

  1. Lukashenko amends emergency transfer of power
  2. German centre-left picks Scholz as would-be chancellor
  3. EU has not ordered AstraZeneca vaccines beyond June
  4. Macron: Pandemic showed need for more EU integration
  5. Election win fuels Scottish nationalists' referendum plan
  6. Surge in migrant arrivals to Italian island
  7. EU embassy pays bail for Georgia opposition leader
  8. British aristocrats caught peddling Kremlin ties

MEPs chide Portugal and Council in EU prosecutor dispute

The Belgian and Bulgarian prosecutors who were appointed had also not been the experts' first choice. Belgian prosecutor Jean-Michel Verelst has challenged the council's decision at the European Court of Justice.

Stakeholders' Highlights

  1. Nordic Council of MinistersNordic Council enters into formal relations with European Parliament
  2. Nordic Council of MinistersWomen more active in violent extremist circles than first assumed
  3. Nordic Council of MinistersDigitalisation can help us pick up the green pace
  4. Nordic Council of MinistersCOVID19 is a wake-up call in the fight against antibiotic resistance
  5. Nordic Council of MinistersThe Nordic Region can and should play a leading role in Europe’s digital development
  6. Nordic Council of MinistersNordic Council to host EU webinars on energy, digitalisation and antibiotic resistance

Latest News

  1. EU and US urge Israel to defuse Jerusalem violence
  2. Frontex 'mislabelling minors as adults' on Greek islands
  3. Has Albania really met the 15 tests to join the EU? No
  4. Vaccine fairness plus Russia on table This WEEK
  5. EU ambassadors flock to Red Square for Putin's parade
  6. MEPs win battle for bigger citizens' voice at Conference
  7. Hungary gags EU ministers on China
  8. Poland and Hungary push back on 'gender equality' pre-summit

Join EUobserver

Support quality EU news

Join us